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10-K 1 oxy10k12-31x2018.htm 10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K



þ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934		¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended	December 31, 2018	For the transition period from to

Commission File Number 1-9210

Occidental Petroleum Corporation

(Exact name of registrant as specified in its charter)



State or other jurisdiction of incorporation or organization		Delaware
I.R.S. Employer Identification No.		95-4035997
Address of principal executive offices		5 Greenway Plaza, Suite 110, Houston, Texas
Zip Code		77046
Registrant's telephone number, including area code		(713) 215-7000

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class		Name of Each Exchange on Which Registered
9 1/4% Senior Debentures due 2019		New York Stock Exchange
Common Stock, $0.20 par value		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act: (Note: Checking the box will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections). Yes ¨ No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period as the registrant was required to submit and post files). Yes þ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. (See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act).



Large Accelerated Filer	þ	Accelerated Filer	¨	Emerging Growth Company	¨
Non-Accelerated Filer	¨	Smaller Reporting Company	¨

If an Emerging Growth Company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2) Yes ¨ No þ

The aggregate market value of the registrant's Common Stock held by nonaffiliates of the registrant was approximately $64.0 billion, computed by reference to the closing price on the New York Stock Exchange composite tape of $83.68 per share of Common Stock on June 30, 2018.

At January 31, 2019, there were 749,546,443 shares of Common Stock outstanding, par value $0.20 per share.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement, relating to its May 10, 2019 Annual Meeting of Stockholders, are incorporated by reference into Part III.



	TABLE OF CONTENTS	Page
Part I
Items 1 and 2	Business and Properties.........................................................................................................................................................	3
	General.............................................................................................................................................................................	3
	Oil and Gas Operations....................................................................................................................................................	3
	Chemical Operations........................................................................................................................................................	4
	Midstream and Marketing Operations...............................................................................................................................	5
	Capital Expenditures.........................................................................................................................................................	5
	Employees........................................................................................................................................................................	5
	Environmental Regulation.................................................................................................................................................	5
	Available Information.........................................................................................................................................................	5
Item 1A	Risk Factors............................................................................................................................................................................	6
Item 1B	Unresolved Staff Comments...................................................................................................................................................	9
Item 3	Legal Proceedings..................................................................................................................................................................	9
Item 4	Mine Safety Disclosures.........................................................................................................................................................	9
	Executive Officers...................................................................................................................................................................	10
Part II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities..............	10
Item 6	Selected Financial Data..........................................................................................................................................................	12
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A).....................................	13
	Strategy.............................................................................................................................................................................	13
	Oil and Gas Segment........................................................................................................................................................	14
	Chemical Segment............................................................................................................................................................	20
	Midstream and Marketing Segment..................................................................................................................................	21
	Segment Results of Operations and Significant Items Affecting Earnings........................................................................	22
	Taxes.................................................................................................................................................................................	24
	Consolidated Results of Operations.................................................................................................................................	24
	Consolidated Analysis of Financial Position......................................................................................................................	26
	Liquidity and Capital Resources.......................................................................................................................................	26
	Off-Balance-Sheet Arrangements.....................................................................................................................................	28
	Contractual Obligations.....................................................................................................................................................	28
	Lawsuits, Claims and Contingencies................................................................................................................................	28
	Environmental Liabilities and Expenditures......................................................................................................................	29
	International Investments..................................................................................................................................................	31
	Critical Accounting Policies and Estimates.......................................................................................................................	31
	Significant Accounting and Disclosure Changes...............................................................................................................	34
	Safe Harbor Discussion Regarding Outlook and Other Forward-Looking Data................................................................	34
Item 7A	Quantitative and Qualitative Disclosures About Market Risk..................................................................................................	34
Item 8	Financial Statements and Supplementary Data.....................................................................................................................	36
	Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements.................................	36
	Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting.......................	37
	Consolidated Balance Sheets...........................................................................................................................................	38
	Consolidated Statements of Operations...........................................................................................................................	40
	Consolidated Statements of Comprehensive Income.......................................................................................................	41
	Consolidated Statements of Stockholders' Equity.............................................................................................................	42
	Consolidated Statements of Cash Flows..........................................................................................................................	43
	Notes to Consolidated Financial Statements....................................................................................................................	44
	Quarterly Financial Data (Unaudited)................................................................................................................................	74
	Supplemental Oil and Gas Information (Unaudited).........................................................................................................	76
	Schedule II – Valuation and Qualifying Accounts..............................................................................................................	92
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................................	93
Item 9A	Controls and Procedures........................................................................................................................................................	93
	Management's Annual Assessment of and Report on Internal Control Over Financial Reporting....................................	93
	Disclosure Controls and Procedures.................................................................................................................................	93
Item 9B	Other Information....................................................................................................................................................................	93
Part III
Item 10	Directors, Executive Officers and Corporate Governance......................................................................................................	93
Item 11	Executive Compensation........................................................................................................................................................	94
Item 12	Security Ownership of Certain Beneficial Owners and Management ....................................................................................	94
Item 13	Certain Relationships and Related Transactions and Director Independence.......................................................................	94
Item 14	Principal Accounting Fees and Services................................................................................................................................	94
Part IV
Item 15	Exhibits and Financial Statement Schedules.........................................................................................................................	94
Item 16	Form 10-K Summary..............................................................................................................................................................	96

Part I

ITEMS 1 AND 2 BUSINESS AND PROPERTIES

In this report, "Occidental" means Occidental Petroleum Corporation, a Delaware corporation (OPC) incorporated in 1986, or OPC and one or more entities in which it owns a controlling interest (subsidiaries). Occidental conducts its operations through various subsidiaries and affiliates. Occidental’s executive offices are located at 5 Greenway Plaza, Suite 110, Houston, Texas 77046; telephone (713) 215-7000.

GENERAL

Occidental’s principal businesses consist of three segments. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGL) and natural gas. The chemical segment (OxyChem) mainly manufactures and markets basic chemicals and vinyls. The midstream and marketing segment purchases, markets, gathers, processes, transports and stores oil, condensate, NGL, natural gas, carbon dioxide (CO2) and power. It also trades around its assets, including transportation and storage capacity. Additionally, the midstream and marketing segment invests in entities that conduct similar activities.

For information regarding Occidental's segments, geographic areas of operation and current developments, including strategies and actions related thereto, see the information in the "Management’s Discussion and Analysis of Financial Condition and Results of Operations" (MD&A) section of this report and Note 17 to the Consolidated Financial Statements.

OIL AND GAS OPERATIONS

General

Occidental’s domestic upstream oil and gas operations are located in Texas and New Mexico. International operations are located in Colombia, Oman, United Arab Emirates (UAE) and Qatar.

Proved Reserves and Sales Volumes

The table below shows Occidental’s total oil, NGL and natural gas proved reserves and sales volumes in 2018, 2017 and 2016. See "MD&A — Oil and Gas Segment," and the information under the caption "Supplemental Oil and Gas Information" for certain details regarding Occidental’s proved reserves, the reserves estimation process, sales and production volumes, production costs and other reserves-related data.

Competition

As a producer of oil, condensate, NGL and natural gas, Occidental competes with numerous other domestic and international public, private, and government producers. Oil, NGL and natural gas are commodities that are sensitive to prevailing global and local, current and anticipated market conditions. Occidental competes for transportation capacity and infrastructure for the delivery of its products, which are sold at current market prices or on a forward basis to refiners and other market participants. Occidental’s competitive strategy relies on increasing production through developing conventional and unconventional fields, utilizing primary and enhanced oil recovery (EOR) techniques and strategic acquisitions in areas where Occidental has a competitive advantage as a result of its current successful operations or investments in shared infrastructure. Occidental also competes to develop and produce its worldwide oil and gas reserves safely and cost-effectively, maintain a skilled workforce and obtain quality services.

Comparative Oil and Gas Proved Reserves and Sales Volumes

Oil (which includes condensate) and NGL are in millions of barrels; natural gas is in billions of cubic feet (Bcf); barrels of oil equivalent (BOE) are in millions.



	2018					2017					2016
Proved Reserves	Oil	NGL	Gas	BOE	(a)	Oil	NGL	Gas	BOE	(a)	Oil	NGL	Gas	BOE	(a)
United States	1,186	284	1,445	1,711		1,107	247	1,205	1,555		960	219	1,045	1,353
International	397	202	2,650	1,041		408	198	2,626	1,043		397	201	2,729	1,053
Total	1,583	486	4,095	2,752		1,515	445	3,831	2,598		1,357	420	3,774	2,406
Sales Volumes
United States	91	25	119	136		73	20	108	111		69	19	132	110
International	62	11	189	104		66	11	188	109		74	11	217	121
Total	153	36	308	240		139	31	296	220		143	30	349	231

Note: The detailed proved reserves information presented in accordance with Item 1202(a)(2) to Regulation S-K under the Securities Exchange Act of 1934 (Exchange Act) is provided under the heading "Supplemental Oil and Gas Information". Proved reserves are stated on a net basis after applicable royalties.


(a)	Natural gas volumes are converted to barrels of oil equivalence (BOE) at six thousand cubic feet (Mcf) of gas per one barrel of oil. Barrels of oil equivalence does not necessarily result in price equivalence. The price of natural gas on a BOE basis is currently substantially lower than the corresponding price for oil and has been similarly lower for a number of years. For example, in 2018, the average daily prices of West Texas Intermediate (WTI) oil and New York Mercantile Exchange (NYMEX) natural gas were $64.77 per barrel and $2.97 per Mcf, respectively, resulting in an oil to gas ratio of over 20 to 1.

(a)

Natural gas volumes are converted to barrels of oil equivalence (BOE) at six thousand cubic feet (Mcf) of gas per one barrel of oil. Barrels of oil equivalence does not necessarily result in price equivalence. The price of natural gas on a BOE basis is currently substantially lower than the corresponding price for oil and has been similarly lower for a number of years. For example, in 2018, the average daily prices of West Texas Intermediate (WTI) oil and New York Mercantile Exchange (NYMEX) natural gas were $64.77 per barrel and $2.97 per Mcf, respectively, resulting in an oil to gas ratio of over 20 to 1.

CHEMICAL OPERATIONS

General

OxyChem owns and operates manufacturing plants at 22 domestic sites in Alabama, Georgia, Illinois, Kansas, Louisiana, Michigan, New Jersey, New York, Ohio, Tennessee and Texas and at two international sites in Canada and Chile. In 2018, OxyChem achieved a full year of operations at the 1.2 billion pound-per-year ethylene cracker at the OxyChem Ingleside, Texas facility as well as the 4CPe unit at OxyChem’s Geismar, Louisiana site. The ethylene cracker, a 50/50 joint venture with Mexichem S.A.B. de C.V., began commercial operations in the first quarter of 2017.

Competition

OxyChem competes with numerous other domestic and international chemical producers. OxyChem’s market position was first or second in the United States in 2018 for the principal basic chemicals products it manufactures and markets as well as for vinyl chloride monomer (VCM). OxyChem ranks in the top three producers of polyvinyl chloride (PVC) in the United States. OxyChem’s competitive strategy is to be a low-cost producer of its products in order to compete on price.

OxyChem produces the following products:




Principal Products	Major Uses	Annual Capacity
Basic Chemicals
Chlorine	Raw material for ethylene dichloride (EDC), water treatment and pharmaceuticals	3.4 million tons
Caustic soda	Pulp, paper and aluminum production	3.5 million tons
Chlorinated organics	Refrigerants, silicones and pharmaceuticals	1.0 billion pounds
Potassium chemicals	Fertilizers, batteries, soaps, detergents and specialty glass	0.4 million tons
EDC	Raw material for vinyl chloride monomer (VCM)	2.1 billion pounds
Chlorinated isocyanurates	Swimming pool sanitation and disinfecting products	131 million pounds
Sodium silicates	Catalysts, soaps, detergents and paint pigments	0.6 million tons
Calcium chloride	Ice melting, dust control, road stabilization and oil field services	0.7 million tons
Vinyls
VCM	Precursor for polyvinyl chloride (PVC)	6.2 billion pounds
PVC	Piping, building materials and automotive and medical products	3.7 billion pounds
Ethylene	Raw material for VCM	1.2 billion pounds (a)

(a) Amount is gross production capacity for 50/50 joint venture with Mexichem.

MIDSTREAM AND MARKETING OPERATIONS

General

Occidental's midstream and marketing operations primarily support and enhance its oil and gas and chemical businesses and also provide similar services for third parties.

In 2018, Occidental sold several non-core assets, including the Centurion common carrier oil pipeline and storage system, Southeast New Mexico oil gathering system and Ingleside Crude Terminal. Following the transactions, Occidental retained its long-term flow assurance, pipeline takeaway and export capacity through its retained marketing business.

Also within the midstream and marketing segment is Oxy Low Carbon Ventures (OLCV). OLCV seeks to capitalize on Occidental’s EOR leadership by developing carbon capture, utilization and storage projects that source anthropogenic carbon dioxide and promote innovative technologies that drive cost efficiencies and economically grow Occidental’s business while reducing emissions.

Competition

Occidental's midstream and marketing businesses operate in competitive and highly regulated markets. Occidental's marketing business competes with other market participants on exchange platforms and through other bilateral transactions with direct counterparties.

The midstream and marketing operations are conducted in the locations described below as of December 31, 2018:



Location	Description	Capacity
Gas Plants
Texas, New Mexico and Colorado	Occidental and third-party-operated natural gas gathering, compression and processing systems, and CO2 processing and capturing	2.8 Bcf per day
United Arab Emirates	Natural gas processing facilities for Al Hosn Gas	1.3 Bcf of natural gas per day
Pipelines and Gathering Systems
Texas, New Mexico and Colorado	CO2 fields and pipeline systems transporting CO2 to oil and gas producing locations	2.8 Bcf per day
Dolphin Pipeline - Qatar and United Arab Emirates and Oman	Equity investment in a natural gas pipeline	3.2 Bcf of natural gas per day
Western and Southern United States and Canada	Equity investment in entity involved in pipeline transportation, storage, terminalling and marketing of oil, gas and related petroleum products	17,965 miles of active crude oil and NGL pipelines and gathering systems. (a) 108 million barrels of crude oil, refined products and NGL storage capacity and 65 Bcf of natural gas storage working capacity(a)
Power Generation
Texas and Louisiana	Occidental-operated power and steam generation facilities	1,200 megawatts of electricity and 1.6 million pounds of steam per hour


(a)	Amounts are gross, including interests held by third parties.

CAPITAL EXPENDITURES

For information on capital expenditures, see the information under the heading "Liquidity and Capital Resources” in the MD&A section of this report.

EMPLOYEES

Occidental employed approximately 11,000 people at December 31, 2018, 7,000 of whom were located in the U.S. Occidental employed approximately 7,000 people in the oil and gas and midstream and marketing segments and 3,000 people in the chemical segment. An additional 1,000 people were employed in administrative and headquarters functions. Approximately 500 U.S.-based employees and 900 international-based employees are represented by labor unions.

ENVIRONMENTAL REGULATION

For environmental regulation information, including associated costs, see the information under the heading "Environmental Liabilities and Expenditures" in the MD&A section of this report and "Risk Factors."

AVAILABLE INFORMATION

Occidental’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, are available free of charge on its website, www.oxy.com, as soon as reasonably practicable after Occidental electronically files the material with, or furnishes it to, the Securities and Exchange Commission (SEC). In addition, copies of our annual report will be made available, free of charge, upon written request.

Information contained on Occidental's website is not part of this report.

Next: Item 1A. RISK FACTORS